NEW YORK (CNN/Money) -
Bond prices eased Wednesday as a warning on interest rates from a top Federal Reserve official overshadowed a well-received auction of two-year notes.
At about 3:30 p.m. ET, the benchmark 10-year note slipped 5/32 to 102-11/32 to yield 3.71 percent, up from 3.70 late Tuesday. The 30-year bond fell 4/32 to 110-27/32 to yield 4.66 percent, unchanged from late yesterday.
The two-year bond was little changed at 100-1/32 with a yield of 1.47 percent, and the five-year note dipped 1/32 to 99-26/32, yielding 2.67.
The sale of $26 billion in new two-year Treasury notes went at a high yield of 1.52 percent and drew bids for 2.18 times the amount on offer, short of February's lofty 2.43 level but above the 1.9 average ratio of last year's auctions.
Bid-to-cover refers to how much interest there is in a new issue compared with the amount being offered.
"The auction came in right at the market; there was moderate interest, nothing spectacular, but at 1.50 percent (50 basis points above the cost of carry) you can expect that," John Spinello, a fixed-income strategist at Merrill Lynch Government Securities, told Reuters.
Prices were soft going into the sale after Jack Guynn, president of the Fed Bank of Atlanta, warned that keeping rates at the current 1.0 percent for too long could eventually cause problems. Guynn is not a voting member on the Fed's policy committee this year.
On the economic front, orders for big-ticket durable goods -- items meant to last three years or more -- advanced 2.5 percent after falling a revised 2.7 percent in January, the Commerce Department said.
Wall Street had expected a more modest 1.7 percent gain after the surprise decline the previous month.
A 9.9 percent increase in transportation equipment drove the advance, chalking up the largest rise since July 2002. Excluding transportation, new orders fell 0.3 percent in February -- the first decline in three months.
The Commerce Department also said that new home sales surged in February to their highest level since August.
Sales of new homes rose a stronger-than-expected 5.8 percent to a seasonally adjusted 1,163,000 annual pace in February, the fastest rate since last August's 1,190,000 clip.
In the currency market, the dollar traded in mixed territory against the euro and the yen after the European Central Bank hinted that the bank could cut interest rates if consumer spending does not pick up.
This pressured the euro as investors often look to park money in countries with higher interest rates.
"In terms of the currency market (durable goods data) had very little impact and has probably been forgotten about. The main focus is still on comments out of the euro zone," Tim Mazanec, senior currency strategist at Investors Bank & Trust in Boston, told Reuters.
Late Tuesday the euro bought $1.2126, down from $1.2328, and the dollar bought ¥106.22, down from ¥106.78.
--Reuters contributed to this report.
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